Australians get big health bang for buck

July 29, 2014

Australia has one of the world’s most cost-effective health systems, with people living longer on average than just about anywhere else on the globe for a fraction of the expenditure of many other developed countries, challenging claims about the relative inefficiency of the nation’s health system.

An international comparison of health spending by the Organisation for Economic Cooperation and Development has found that health accounted for 9.1 per cent of Australia’s gross domestic product in 2011-12, below the OECD average of 9.3 per cent and well down from that of the US, where it reached 16.9 per cent (though Australian patients have among the highest out-of-pocket health expenses among developed countries). It had risen just one percentage point since 2000.

Yet, in terms of health outcomes, Australia was placed near the top of the table on several key measures. Life expectancy at birth in 2012 was 82.1 years, meaning that Australians, on average, could expect to live two years longer than the OECD average. Only the Japanese, Swiss, Icelanders, Spanish, Italians and French could expect to live longer.

In its analysis, the OECD reported that health spending among its member countries was gradually recovering after falling sharply during the global financial crisis.

The deep recession that followed the GFC in many economies led governments to cut back heavily on spending, including expenditure on health, which virtually stalled among developed countries in 2010.

But in its latest update, the OECD observed that both government and private health spending had since strengthened, reaching an average annual growth rate slightly above 2 per cent in 2012 – though this was still much weaker than the 5 per cent growth recorded in 2008 just before the GFC struck.

Most of the drag on health spending among OECD countries comes from Europe, where deep budget austerity continues to wright heavily – no more so than in Greece, where health expenditure in 2012 was, in real terms, 25 per cent less than in 2009.

Among OECD countries that are still developing economically, growth was much stronger, up by 6.5 per cent in Chile and 8.5 per cent in Mexico due to work on building a system of universal health care coverage.

By comparison with most European countries, Australia’s health expenditure has remained remarkably robust during the period of the GFC and its aftermath, and increased by 5 per cent in real terms in 2011-12.

“This strong increase in Australia was triggered by substantial growth in spending on outpatient curative care, administration and public health services,” the OECD said, an analysis that lends some support to the Government’s ambition to cut down on bureaucratic duplication and administrative inefficiencies in the delivery of public health services.

But in a warning to the Government about the need to intensify preventive health efforts if it was to avoid higher health costs in the future, the OECD found that Australia did not fare well regarding weight control. The measured obesity rate among Australian adults in 2012 was 28.3 per cent, well above the OECD average of 22.7 per cent.

“The growing prevalence of obesity foreshadows increases in the occurrence of health problems such as diabetes and cardiovascular diseases, and higher health care costs in the future,” the OECD warned.

Interestingly, the OECD found the public-private breakdown in sources of health funding in Australia were outside the norm among OECD countries, particularly European nations.

While the public sector is the main source of health funding in almost all OECD countries, accounting for an average of 72 per cent of all health spending across the OECD, in Australia the public contribution was lower at 68 per cent. In the United States, public spending is less than half of all health expenditure, while in places like the Netherlands, Denmark, Luxembourg and the United Kingdom Germany it is 80 per cent or more.

The OECD reported there had been a major increase in the size of Australia’s medical workforce since 2000, and the country now had 3.3 doctors per 1000 people, slightly above the OECD average of 3.2.

Australia also ranked highly in its efforts to curb smoking. Its adult smoking rate of 15.1 per cent was among the lowest among OCED countries, where the average was 20.7 per cent.